Costco (COST) Stock Surges on Better-Than-Expected June Sales
NEW YORK (TheStreet) -- Shares of Costco Wholesale (COST) - Get Report are up 4.72% to $163.38 on heavy trading volume late Thursday afternoon after the membership-only warehouse club reported better-than-expected same-store sales for June.
Comparable-store sales were flat last month, beating analysts' expectations for a 1.5% drop. Excluding certain items such as foreign exchange, same-store sales rose 3%.
"This type of performance warrants a premium valuation, in our view," UBS wrote in a note cited by Barron's.
Total sales increased 3% to $11.33 billion last month, up from $11.03 billion a year ago.
Costco is transitioning its loyalty credit card to Visa (V) from American Express (AXP), which should result in a pickup in spend and membership as private-label credit-card customers take advantage of the new card's "more attractive reward structure," UBS added.
"Also, we think Costco's reliance on grocery & gas sales (2/3 of total sales) helps insulate it from Amazon.com (AMZN)," UBS said. "These factors support our forecast of 4% core U.S. comp growth in July, which would match its highest growth rate since November 2015."
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Separately, TheStreet Ratings team rates the stock as a "buy" with a ratings score of A-.
Costco's strengths such as its revenue growth, increase in net income, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel its strengths outweigh the fact that the company shows low profit margins.
You can view the full analysis from the report here: COST
TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this article's author.